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Private Equity Market is cruel to GC - WSJ.com

Discussion in 'Bad Dog Cafe' started by Deeve, May 11, 2020.

  1. Deeve

    Deeve Poster Extraordinaire Silver Supporter

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  2. nojazzhere

    nojazzhere Doctor of Teleocity

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  3. Deeve

    Deeve Poster Extraordinaire Silver Supporter

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    I was afraid of that, so I made a PDF save and attempted 2x to make it an attachment.
    Take my quarterly bonus away . . . :rolleyes:
     

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  4. 985plowboy

    985plowboy Friend of Leo's

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    Someone give me the jist.
     
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  5. String Tree

    String Tree Doctor of Teleocity Ad Free Member

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    GC has been on the Brink of Collapse for how many years now???
     
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  6. mfguitar

    mfguitar Tele-Afflicted Silver Supporter

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    They might be doing OK with mail order but their business model is just not good. Its the hardest place in the world to make a simple purchase. They are a specialty retailer that always has pretty expensive retail space when they just would not have to. In my town they have 2 locations that are about 15 minutes apart and that makes little sense.
     
  7. rangercaster

    rangercaster Poster Extraordinaire

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    GC could be very successful...

    They just need to revamp their corporate suite ...

    Brick and mortar retail is going the way of the dinosaurs ...
     
  8. Toto'sDad

    Toto'sDad Telefied Ad Free Member

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    I'm not sure why they are so hard to actually make a purchase from, but I know they are. I had them hold an amp one time until I could get time to go by and pick it up. They knew me, and I'd bought lots of stuff, so they did as I requested. I stopped in to pick up the amp, and it took an hour and a half to get out the door with it, and I paid for it in full. They just kept running around in circles at full speed! Finally, I told the guy, if I'm not out of here in the next five minutes, I'm leaving without it. Boom they got it checked out for me.
     
    Last edited: May 12, 2020
  9. scooteraz

    scooteraz Friend of Leo's

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    Gist of story:

    Private equity firms bought out a bunch of brick and mortar retailers on the idea that the leveraged buyouts (and the high fees they gave themselves in for the process) would be recouped in future sales. But, retail from large brick and mortar stores has been soft for a while, and their predictions would have been rosy in any event. The current crisis caused more stress, and the likelihood of ever recovering the debt through sales is pretty slim. GC was one of the retailers so hit.

    It was a story that you don’t have to read to already know. J Crew and Academy Sports have made regular news. It would be hard to believe that GC, with it’s business model, would be any different.

    Interestingly, two guitar giants that were not mentioned are Sam Ash and Sweetwater. Maybe because they are not owned by private equity firms? It is ironic that GC may end up closing shop; I remember when they were confident they would drive Sam Ash clean out of business.
     
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  10. scooteraz

    scooteraz Friend of Leo's

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    As one comedian has said, I’ve been in that store, and I don’t think Victoria has any secrets....
     
  11. t-ray

    t-ray Tele-Afflicted Gold Supporter

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    I suspect that, because of debt and the very large number of locations GC had to pare back considerably on payroll. Not enough seasoned floor employees to manage and to sell. Sweetwater is a whole different model. Virtually all on-line sales with a mega store that also serves as its national distribution center. I have bought a fair amount of gear from them, including a Gibson LP Junior, and have yet to visit their premises. Very satisfied with their service and responsiveness.
     
  12. scooteraz

    scooteraz Friend of Leo's

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    Because of business travel, I have been there a number of times. Great store. Actually had coffee with my sales guy. He spent about 40 min just hanging out and discussing the store, and music and my purchases, how I used them and what else I might be looking for. The only time I got that type of service from GC was when the local GC manager played in our church group. I have spend a fair amount with them over the years in purchases for myself and the church.
     
  13. SoK66

    SoK66 Tele-Afflicted

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    As the big stores collapse behind slowly decayong mall locations, shopworn inventory and chronically bad service, the mom & pop specialty guitar stores will make a comeback.
     
  14. scooteraz

    scooteraz Friend of Leo's

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    Actually, quite a few never left. They just changed their business models a bit to account for the silliness of GC. And they also entered the internet sweepstakes. But I think your point is well taken, a well run local shop will have a clientele, so long as they can keep the rents and overheads in control.
     
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  15. SecretSquirrel

    SecretSquirrel Friend of Leo's Silver Supporter

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    The big private equity firms are not your friend. In fact...well...just keep that in mind.
     
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  16. jrblue

    jrblue Friend of Leo's

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    GC is no mystery. It sucks. They get bottom-of-the-barrell production, place it in about the worst store envoronment imaginable, offer poor service from incompetents, and surround the small amount of decent stuff they sell with super-sale crap. GC is where you go not to spend money, or if you have no idea what a good guitar is. The Hollywood store is an exception, for obvious reasons. The rest are terrible. It doesn't make any difference how it's funded, etc., because it sucks. There's no financial model that works when you sell crap and the one thing people like about you is "bargain basement sales." Sure, they have a convenient approach to selling used stuff. Too bad that won't earn them anything. Sam Ash is pretty similar, really.
     
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  17. TelenTubes

    TelenTubes Tele-Holic

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    This happens frequently during down cycles. Private equity companies buy companies - ever increasingly thinking they can cut all the fat and realize more net income. To do so, they leverage themselves to the hilt to buy these companies, never running the proper business cash flow scenarios necessary to predict any negative business cycles.

    Happens ALL the time. I've bought and run and sold one company and advised on a half dozen more, and I've seen how this happens at the $10-$20 million business level several times. The math isn't any different at the $10-$20 billion level.
     
  18. fenderrookie

    fenderrookie A fan of Leo! Ad Free Member

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    Many large corps are only 60-90 days away from bankruptcy
     
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  19. Slim Chance

    Slim Chance Tele-Afflicted

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    Most of their problems stem from the leveraged buyout by Bain Capital. GC is over a billion in debt. They’d probably survive otherwise, but now, “who knows?”.
     
  20. boris bubbanov

    boris bubbanov Tele Axpert Ad Free Member

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    The assemblers in Corona and Ensenada, Memphis and Nashville and etc. don't know which guitars are going to the Hollywood GC and which ones are going to the El Toro store and which ones to Mobile, Alabama. And which are going to a Booteek dealer.

    Your job, as a buyer, is just much much harder at some of these down and out GC locations. But if you know how to play; know what a guitar is supposed to feel like and sound like and you can afford to say no and walk out the door as necessary, you could historically cut amazing deals at GC and the further you got from the Hollywood location, the better deals on real nice guitars occur more. I've bought some stupid number of guitars (like 40) from various GC locations from NY to FL to GA and at least one in every state I-10 hits except New Mexico. But the only "Hollywood" guitars I bought were two, across the street at Sam Ash.

    If you ask me, what the Hollywood store sells is Morale. They make the customer feel better spending more, but the guitar doesn't know which store it came from - why, it could've even come from the Bakersfield store! :^)
     
    Last edited: May 12, 2020
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